Remember Me
forgot your password?

Interest Only Mortgages Vs. Regular Mortgages

Mortgage finance is one of the most popular options available for average home buyers. There are a variety of mortgage options and each caters to specific requirements of borrowers and their paying capacity. While borrowers can negotiate the terms and conditions of mortgage to be availed of by them, it is always a good idea to do homework well before initiating steps to negotiate the mortgage loan with mortgage lenders and mortgage brokers.

Interest only mortgage is one of the better options available to borrowers who want to make small payments during the initial stages of mortgages availed of by them. Here the borrowers have to pay only the interest portion on the mortgage. As the initial repayments are considerable lower, borrowers can manage their finances in an effective manner. The interest only payment period usually lasts for about 5-10 years; depending upon the option chosen by you. You can also decide to pay more than only the interest portion during the initial duration of your mortgage, if you like.
Regular mortgages on the other hand, involve paying equated monthly amount where part of principal amount along with interest is paid every month.

While the interest mortgage option looks great on the face of it, you need to consider the option carefully. This is because though the initial amount payable is less, once the interest only period is over, your installment increases tremendously. Thus unless you have planed your finances carefully, whereby you can raise enough finances later on during the mortgage period, you may feel the pinch. Thus while the interest only mortgage may allow you the option to buy a relatively larger home, you need to be aware of the fact that later on, you may need to pay a larger amount towards principal repayment during the mortgage period.

Most interest only mortgage lenders offer adjustable rates, which mean that in case of rising interest rate regime, your monthly installment amount may rise considerably or alternatively your repayment period may be enhanced depending upon the rise in mortgage rate. Secondly the mortgage option can be considered a good option only when your income is expected to rise during later period of your mortgage period, when your principal amount starts getting repaid.

An interest only mortgage loan can allow you to purchase a much bigger and lavish home on account of the low initial payments. However it is always advisable to set aside a small amount towards the principal repayment as your monthly installment may shoot up considerably immediately after the interest only period is over and you may have to face the reality of rising monthly payments.

The best option before going for an interest only mortgage is to evaluate the financial needs and requirements compared to expected cash inflows in future.

Redrose

I am a web developer

Rate this Article: 0 / 5 stars - 0 vote(s)
Print Email Re-Publish

Add new Comment



Captcha

  • Latest Mortgage Articles
  • More from Redrose

Refinance a Mortgage by Using President Obamas Stimulus Plan

By: MPetrone | 24/12/2009
The new mortgage stimulus programs available because of President Obamas “Making Home Affordable” plan will help millions of people. The help will come from new mortgage refinancing and modification options that will lower monthly payments, help homeowners avoid losing their home, and save people money. Here are some important things you should know regarding refinancing a mortgage with Obamas stimulus program.

FHA Mortgage Requirements

By: Florida Mortgage | 24/12/2009
FHA loan qualifying requirements have been relaxed as part of the Federal government's Housing and Economic Recovery Act, 2009. The purpose of the act is to provide some relief for home owners affected by the subprime housing finance crisis, and to help stabilize the housing market overall.

An FHA loan can be the solution to monetary concerns or problems

By: FHA home loan Lender | 24/12/2009
An FHA loan can be the solution to monetary concerns or problems.

2010 Mortgage Interest Rate Predictions

By: MPetrone | 24/12/2009
Mortgage refinancing in 2010 will still be beneficial to many homeowners, but I do predict that interest rates will rise making it less beneficial for everyone, and making it not beneficial at all for many others. While mortgage interest rates will remain low, they will rise, and I think I know when and why. Here are my mortgage interest rate predictions for 2010, and how I made them.

Refinancing a Mortgage with Chase Bank and Obamas Stimulus Plan

By: MPetrone | 23/12/2009
Chase bank is taking part in President Obamas “Making Home Affordable” stimulus plan and offering new mortgage refinancing and modification options to homeowners. These new options allow all sorts of homeowners in all sorts of financial problems to easily get help lowering their monthly payments, saving money, avoiding foreclosure, or all of the above. Here are some important things you need to know about refinancing a mortgage with Chase and Obamas stimulus plan.

Notion Of Bad Credit Mortgage Refinancing

By: David Lathan | 23/12/2009
There is a an evergrowing number of companies that offer services such as bad credit mortgage refinancing because of the increase in the number of default cases. These companies provided a valuable service especially if your lender is not interested in working with you.

Too scared to buy a home in this economy? Well, this is the perfect time to do so

By: Stephen Marcum | 23/12/2009
First-time home buyers in the DC area who purchase a home before June 2010 can reduce their tax liability. They claim the tax credit on their tax return. Any home buyer who did not own a home since 2005 qualifies as a first-time home buyer. The $8000 tax credit does not have to be repaid if the purchased home is a primary residence for three years.

2010 Mortgage Interest Rates, Trends, Predictions, and Outlook

By: MPetrone | 23/12/2009
Homeowners have been refinancing and taking advantage of low interest rates and Government stimulus programs. However, I think in 2010, things may change in the housing market. Here are my mortgage interest rate predictions for 2010, how I made them, and how they will effect homeowners looking to refinance.f

Take the Healthcare Spending Quiz: Do you Know your Dollars and Cents?

By: Redrose | 28/01/2008 | Health
There has been a lot written about the state of healthcare in America. And if you’ve been paying attention, you know that a lot of money gets spent. A lot by the federal government in medicare and legislation. A lot by state agencies. A lot by employeers. And even more by employees themselves.

The World's Oldest Underground System

By: Redrose | 06/12/2007 | Destinations
The London Underground is an underground railway system - also known as a rapid transit system (Tube). London is served by 12 Tube lines. It is the world's oldest underground system. The Underground has 275 stations and runs over 253 miles (408 km) of line.

Interest Only Mortgages Vs. Regular Mortgages

By: Redrose | 13/11/2007 | Mortgage
Are you concerned about finding reasonable loan terms because of your credit situation? It is possible to find affordable mortgage plans in this website even if you have less than perfect credit. Let us serve.

Museums of Preston

By: Redrose | 10/11/2007 | Destinations
Preston is the gateway to Lancashire's beautiful landscape and historical sights. Preston, the administrative capital of Lancashire, is the largest and most important commercial centre in the county.

Trafford Centre Manchester

By: Redrose | 10/11/2007 | Destinations
Blackpool is heavily dependent on tourism. In what is often regarded as its heyday (1900-1950), Blackpool thrived as the factory workers of northern England took their annual holidays there en masse.

Special Education as a Career Choice

By: Redrose | 10/11/2007 | Education
A comprehensive guide to career prospects, universities and colleges, professional institutes, industry associations, jobs and immigration rules in Australia, Canada, India, Singapore, UK and USA.

Submit Your Articles Free: Signup
Article Categories




Use of this web site constitutes acceptance of the Terms Of Use and Privacy Policy | User published content is licensed under a Creative Commons License.
Copyright © 2005-2008 Free Articles by ArticlesBase.com, All rights reserved. (0.34, 1, w3)